Factor Analysis: Factor analysis is a collection of methods used to examine how underlying constructs influence the responses on a number

of measured variables. There are basically two types of factor analysis: exploratory and confirmatory. Exploratory factor analysis (EFA) attempts to discover the nature of the constructs influencing a set of responses. Confirmatory factor analysis (CFA) tests whether a specified set of constructs is influencing responses in a predicted way. Both types of factor analyses are based on the Common Factor Model, illustrated in figure 1. This model proposes that each observed response (measure 1 through measure 5) is influenced partially by underlying common factors (factor 1 and factor 2) and partially by underlying unique factors (E1 through E5). The strength of the link between each factor and each measure varies, such that a given factor influences some measures more than others. This is the same basic model as is used for LISREL analyses.

Figure 1: the common factor analysis Objectives of Factor Analysis: a. The number of common factors influencing the measure: b. Strength of measures between each factors and each observed measures. c. Identifying the nature of constructs underlying the responses in a specific content area

d. demonstrating a dimensionality in the measurement scale. e. determining the important feature classifying the group of items. The current factor analysis is carried out based on the covariance matrix and the result is highlighted below segment-wise. Communalities: This is the proportion of each variable's variance that can be explained by the factors (e.g., the underlying latent continua). It is also noted as h2 and can be defined as the sum of squared factor loadings for the variables.
Communalities

Raw

Rescaled

Initial

Extraction

Initial

Extraction

Review the claim (Sec)

179084.082

178678.095

1.000

.998

Verify Prior Coverage (Sec)

2106.057

244.021

1.000

.116

Gap in Coverage (Sec)

7168.218

1952.057

1.000

.272

Load Condition (Sec)

1058.668

227.943

1.000

.215

Load Exception (Sec)

9945.826

1629.297

1.000

.164

Process current Claim (Sec)

18062.911

5362.171

1.000

.297

Review History Claims (Sec)

7393.600

2396.337

1.000

.324

Process History Claims (Sec)

37638.372

35821.450

1.000

.952

Close/Transfer the Inquiry (Sec)

269.375

8.630

1.000

.032

Update Remarks (Sec)

11420.808

6189.032

1.000

.542

Referring Physicians Letter (Sec)

8238.176

175.121

1.000

.021

Reviewing the Mentor (Sec)

181245.390

181242.315

1.000

1.000

Extraction Method: Principal Component Analysis.

Initial: With principal factor axis factoring, the initial values on the diagonal of the covariance matrix are determined by the squared multiple covariance of the variable with the other variables. For example, if we regress the attribute Review the Claims through the attribute Reviewing the Mentor on Review the claims, the squared multiple scaled covariance would be 1.000. Extraction - The values in this column indicate the proportion of each variable's variance that can be explained by the retained factors. Variables with high values are well represented in the common factor space, while variables with low values are not well represented. (In this case, Close/Transfer Inquiry and referring Physician Letter do have low values.) They are the reproduced variances from the factors that have been extracted. These values can be found out on the diagonal of the reproduced correlation matrix. Total variance Explained:

Total Variance Explained Extraction Sums of Squared Initial Eigenvalues Compo nent Rescaled 1 2 3 4 5 6 7 8 9 10 11 12 Total 203379.737 163807.347 46739.386 13801.790 10443.196 7636.954 6634.424 4620.759 4125.340 1632.491 597.322 212.739 % of Variance 43.867 35.331 10.081 2.977 2.252 1.647 1.431 .997 .890 .352 .129 .046 Cumulative % 43.867 79.198 89.279 92.256 94.509 96.156 97.587 98.583 99.473 99.825 99.954 100.000 Total 1.576 1.150 2.207 % of Variance 13.132 9.583 18.393
a

Loadings

Extraction Method: Principal Component Analysis. a. When analyzing a covariance matrix, the initial eigenvalues are the same across the raw and rescaled solution.

a. Factor - The initial number of factors is the same as the number of variables used in the factor analysis. However, not all 12 factors will be retained. In this problem, only the first three factors will be retained (as we requested). b. Initial Eigen-values Eigen-values are the variances of the factors. Because we conducted our factor analysis on the correlation matrix, the

variables are standardized, which means that the each variable has a variance of 1, and the total variance is equal to the number of variables used in the analysis, in this case, 12. c. Total - This column contains the Eigen-values. The first factor will always account for the most variance (and hence have the highest Eigen-value), and the next factor will account for as much of the left over variance as it can, and so on. Hence, each successive factor will account for less and less variance. d. % of Variance - This column contains the percent of total variance accounted for by each factor. e. Cumulative % - This column contains the cumulative percentage of variance accounted for by the current and all preceding factors. For example, the third row shows a value of 89.279. This means that the first three factors together account for 89.279% of the total variance. f. Extraction Sums of Squared Loadings - The number of rows in this panel of the table correspond to the number of factors retained. In this example, we requested that three factors be retained, so there are three rows, one for each retained factor. The values in this panel of the table are calculated in the same way as the values in the left panel, except that here the values are based on the common variance. The values in this panel of the table will always be lower than the values in the left panel of the table, because they are based on the common variance, which is always smaller than the total variance. g. Rotation Sums of Squared Loadings - The values in this panel of the table represent the distribution of the variance after the varimax rotation. Varimax rotation tries to maximize the variance of each of the factors, so the total amount of variance accounted for is redistributed over the three extracted factors.

Total Variance Explained Extraction Sums of Squared Loadings Compo nent Rescaled 1 2 3 Cumulative % 13.132 22.714 41.108 Total 2.275 1.658 1.000 % of Variance 18.957 13.816 8.335 Cumulative % 18.957 32.773 41.108 Rotation Sums of Squared Loadings

Extraction Method: Principal Component Analysis.

Scree Plot: The Scree plot graphs the Eigen-value against the factor number. We can see these values in the first two columns of the table immediately above. From the third factor on, we can see that the line is almost flat, meaning the each successive factor is accounting for smaller and smaller amounts of the total variance.

Rotated Factor Matrix: This table contains the rotated factor loadings, which are the correlations between the variable and the factor. Because these are correlations, possible values range from -1 to +1. On the /format subcommand, we can use the option blank(.x), which tells SPSS not to print any of the correlations that are .x or less. This makes the output easier to read by removing the clutter of low correlations that are probably not meaningful anyway.

Scaled Component 1 Review the claim (Sec) Verify Prior Coverage (Sec) Gap in Coverage (Sec) Load Condition (Sec) Load Exception (Sec) Process current Claim (Sec) Review History Claims (Sec) Process History Claims (Sec) Close/Transfer the Inquiry (Sec) .021 .038 .514 .202 .393 -.039 .561 .973 -.086 2 .999 .338 -.031 .418 -.097 .542 .095 .068 .140 3 -.015 -.013 -.087 .009 .006 -.035 -.006 -.008 -.071

Update Remarks (Sec) Referring Physicians Letter (Sec)

.723 -.110

.135 -.092

.021 -.027

Reviewing the Mentor (Sec)

-.088

-.087

.992

Hence the above results can be interpreted as follows: The prioritized significant factors for explaining the variations within the data (measured) are: a. Process History Claims b. Update Remarks c. Review the Claims

d. Process Current Claims e. Reviewing the Mentor. Factor Transformation Matrix: This is the matrix by which we can multiply the unrotated factor matrix to get the rotated factor matrix.